Rationale

 The rating reaffirmation of Amplus Coastal Power Private Limited (Amplus Coastal) factors in the strengths arising from the strong parentage of Petroliam Nasional Berhad (PETRONAS; rated Moody’s A2 Stable) that owns a 100% stake in step-down holding company - Amplus Energy Solutions Pte Ltd. The rating also takes comfort from the presence of a cash pooling structure with a defined mechanism for the sharing of surplus cash flow prior to the due date of debt servicing among the cash pooling special purpose vehicles (SPVs), enabling ICRA to take a consolidated view of the 10 cash pooling SPVs. The rating favourably factors in the operational status of the cash pooling portfolio along with the geographical diversification of the pool as the solar assets are located across 19 states/Union Territories. The rating also incorporates the limited offtake risk due to the long-term PPAs signed for the entire portfolio with multiple offtakers. The entire capacity is contracted with the average tenure of the power purchase agreements (PPA) being higher than the debt tenure. Additionally, the PPA tariffs remain significantly lower than the grid tariff of industrial consumers in the respective states, translating into superior tariff competitiveness. Moreover, the regulatory risk remains minimal with the entire cash pooling capacity being onsite (rooftop ground mount) not utilising the grid infrastructure for evacuation, and ~78% being developed in a captive arrangement. However, ICRA notes that the cash pooling SPVs have achieved a PLF of 90-95% of the P-90 levels in the last two years as the generation was impacted by weather issues like an extended monsoon and cement solidification due to winter fog. Going forward, achieving a PLF closer to the P-90 levels of ~16.8% following the measures undertaken by the Group, such as chemical and robot cleaning, will be important from a credit perspective. The rating also factors in the benefits arising from the Amplus Group’s technical experience and its strategic focus in developing and operating rooftop and ground-mounted solar PV projects for the commercial and industrial segments. The rating also draws comfort from the pool’s adequate debt coverage metrics and the stipulated cash sweep clause in case of any breach of the specified debt service coverage ratio (DSCR) level. ICRA also takes comfort from the fact that the projects’ cash flows shall not be utilised for funding any expenses over and above the approved operations and maintenance (O&M) expenses (110% of budgeted will be allowed) or for any investments in projects/SPVs outside the cash pooling arrangement. The rating, however, is constrained by the sensitivity of generation to solar irradiation levels as the revenues are linked to the actual units generated. Also, the ability of the Amplus Group to ensure proper O&M of the solar assets of the project, in line with the stipulated performance parameters in the O&M agreements, remains crucial for the company. The project economics will also remain susceptible to adverse interest rate movements, given the single part nature of the tariff. While weather and operating risks expose the pool to potential temporary cash flow timing mismatches during periods of lower generation, the rating derives strength from the pool’s sizeable on-balance sheet liquidity, which can help tide it over such periods of subdued earnings.